Banker remuneration has been in the news a great deal lately–Fred Goodwin, the former chief executive of the Royal Bank of Scotland Group has been trying to keep his £703,000 pension despite leading the bank to its decline and subsequent need to be bailed out by the UK government. Merrill Lynch distributed bonuses early last year, and the company is now being investigated to determine whether the early payments encouraged Merrill traders to mark down their portfolios so they could report gains in January. And government bailout money, meant to keep banks solvent, has been used to pay out bonuses–Dresdner Kleinwort in Germany isone example.

In our book The Elephant Hunters, Amielle Lake, Nada and I described the trouble with greed in bankers:

[Greed] is a vice most of us are prone to, yet some exhibit less acceptable levels than others. The trouble with greed is that it clouds moneymen’s ability to think clearly. Rather than looking at the so-called bigger picture, they are dominated by their desire to benefit themselves as efficiently as possible. Often it is for money. Sometimes it is also for recognition, praise, attention, in effect the emotional equivalents of the dollar.

The ‘bigger picture’ we’re now seeing is the economic crisis, and bankers are refusing to acknowledge their responsibility for it. What can be done about this? Perhaps the answer to scale back executive pay in the future. The Harvard Business Review Editors’ Blog recently wrote about a study from the 1930s which found that after the Great Depression, American companies with lower executive pay performed better than companies with higher executive pay. The blog notes that the study doesn’t suggest the same would hold true in good times, nor does it address executive motivation; however, it does suggest a correlation between sensible executive pay policies and responsible governance. Responsible governance will certainly become increasingly important if we ever hope to return to economic prosperity.